U.S. stock markets took a downturn on Friday, burdened by unsettling inflation updates and uncertainties about consumer spending amid President Donald Trump’s intensifying trade war. The S&P 500 dropped 1.5% by midday, threatening to erase what had been a promising week. This decline marks potentially the fifth losing week in the last six for the index, which hit an all-time high just last month. As of 11:30 a.m. Eastern time, the Dow Jones Industrial Average decreased by 520 points, or 1.2%, while the Nasdaq composite fell by 2.1%.
Lululemon Athletica was a significant contributor to the market’s decline, plummeting 15% despite reporting a stronger-than-expected profit for the latest quarter. CEO Calvin McDonald cautioned that revenue growth may decelerate in the coming year, attributing it partly to consumers curbing spending due to inflation concerns and economic uncertainty. Additionally, Lululemon highlighted that tariffs and fluctuating foreign-currency values might account for about half of its anticipated reduction in a key performance measure—profit per dollar of revenue.
Oxford Industries, the company behind Tommy Bahama and Lilly Pulitzer brands, also reported better-than-expected quarterly results. Nevertheless, its stock fell 1.6%, with CEO Tom Chubb noting a “deterioration in consumer sentiment” that began in January and worsened into February, affecting demand.
These developments are concerning for Wall Street, as one major fear is that Trump’s trade war could lead U.S. households and businesses to reduce spending. Even if the tariffs prove less harmful than anticipated, the prevailing uncertainty could result in altered consumer behavior that negatively impacts the economy.
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A report released Friday morning revealed that U.S. consumers across political affiliations are becoming more pessimistic about their financial futures. According to a University of Michigan survey, two-thirds of respondents expect unemployment to rise in the coming year—a sentiment not seen since 2009—and this raises concerns about the job market, a crucial pillar of the U.S. economy’s stability.
Another report further stirred worries by indicating that a closely monitored inflation measure was slightly worse than economists predicted last month. This data is significant because it is a key factor in the Federal Reserve’s interest-rate decisions. The report also showed that the growth of Americans’ incomes, excluding government social benefits, has stagnated over the last three months. Brian Jacobsen, chief economist at Annex Wealth Management, commented, “Households aren’t in a good place to absorb a little tariff pain,” adding that the Federal Reserve is unlikely to intervene, given unexpected inflation increases.
The Federal Reserve has maintained its main interest rate this year after significant cuts in late 2024, partly due to concerns over persistent inflation above its 2% target. While further rate cuts could stimulate the economy and financial markets, they would also exacerbate inflation pressures. The economy remains relatively stable, but a weakening economy coupled with high inflation could lead to “stagflation,” a challenging scenario for policymakers with limited effective solutions.
On Friday, some of the steepest losses on Wall Street were experienced by companies reliant on consumer confidence, such as Delta Air Lines, which fell 4.2%, Royal Caribbean Group, down 4%, and Caesars Entertainment, which dropped 3.9%. Conversely, stocks that perform well independent of economic conditions, like utilities, saw gains—American Water Works, for example, rose 1.8%.
Global stock markets remain volatile as an April 2 deadline looms for additional tariffs. Dubbed “Liberation Day” by Trump, this date marks when he plans to introduce tariffs corresponding to those imposed by the United States’ trading partners, including value-added taxes. Internationally, markets in Japan and South Korea experienced sharp declines as automakers faced increased pressure following Trump’s announcement of a proposed 25% tariff on auto imports.
Hyundai Motor fell 2.6% in Seoul, while Honda Motor and Toyota Motor dropped 2.6% and 2.8%, respectively, in Tokyo. On Wall Street, U.S. automakers like General Motors and Ford Motor also felt the impact, sinking 1.6% and 1.9%, respectively, as their supply chains extend throughout North America.
Meanwhile, Thailand’s SET index fell 1% after a powerful earthquake centered in Myanmar shook the region, prompting the prime minister to declare a state of emergency in Bangkok.
In the bond market, the 10-year Treasury yield fell to 4.28% from 4.38% late Thursday, typically declining when expectations for U.S. economic growth or inflation diminish.
The Ripple Effect
- Consumers may face tighter budgets, affecting spending patterns and prioritizing essential goods.
- Increased tariffs could lead to higher consumer prices, impacting affordability and cost of living.
- Uncertainty in stock markets may affect retirement funds and personal investments.
- Reduced consumer confidence can lead to decreased economic growth and job opportunities.
- Manufacturers might adjust supply chains, influencing domestic and international business operations.
- Stagnant income growth could strain household budgets, limiting discretionary spending.
- Persistent inflation may prompt the Federal Reserve to reconsider its interest rate policy, affecting loans and mortgages.
- Global trade tensions could impact international relations and economic stability.
- Potential for “stagflation” poses challenges for economic policymakers, affecting fiscal strategies.
- Shifts in consumer behavior may drive businesses to reassess market strategies and pricing models.
